Burberry has warned that annual profits will be sharply lower than previously expected after consumers left its expensive trenchcoats, bags and scarves off their Christmas shopping lists.
The luxury British brand said trading had been affected by a continued slowdown in luxury demand after rises in the cost of living and increases to interest rates globally.
Burberry is now expecting operating profits of between £410m and £460m in the year to the end of March. It previously said profits would be at the lower end of a £552m to £668m range.
The company’s share price slumped 14% in early trading, before partly recovering to be down 6%, making it the top faller on the FTSE 100 on Friday. Shares are down almost 45% over the past year.
Shoppers found the luxury brand’s premium priced products – such as its classic heritage trenchcoat at £1,890 and signature scarf at £420 – too expensive for household budgets drastically cut back amid the cost of living crisis.
“We are continuing to deliver the transition to our new modern British luxury creative expression for Burberry which started appearing in our stores in early autumn,” said Jonathan Akeroyd, the chief executive of Burberry. “We are still in the early stages of executing on this, which has become more challenging against the backdrop of slowing luxury demand. We experienced a further deceleration in our key December trading period.”
Revenues fell 7% to £706m year on year in the 13 weeks to 30 December. Burberry said sales at comparable stores – those open for more than a year – were down 4% year on year overall for the period, with Europe down 5% and the US down 15%, while Asia Pacific rose 3%.
Rivals including the French luxury brands LVMH and Kering have also reported lower demand for high-end goods in key markets such as the US, Europe and China as the post-pandemic spree wears off.
Last month, National Debtline said that about 6.5 million people would struggle to heat their homes sufficiently over the festive season, while 2.7 million had to choose between buying food or presents, highlighting the drastic impact the cost of living crisis continues to have on household budgets.
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More than 14 million consumers planned to cut back on the number of presents they intended to buy, while 6 million decided that they could only afford to buy gifts for children this year.
Burberry had been enjoying something of a rejuvenation of its fortunes, posting profits of £634m in the year to the end of March 2023, up significantly on the £523m in 2022.
